12/2021 OK Insurance Adjuster License Exam
Fraternal Insurer
A non-profit organization that is operated solely for the benefit of its members. It provides its members with social and insurance benefits
Four steps in establishing negligence
1 legal duty owed 2 breach of duty 3 actual damages 4 proximate cause
No benefit to Bailee
A bailee holds property that others have entrusted to them. They don't have the right to collect on another party's property
Moral Hazard
A character defect that causes some people to exaggerate or fabricate losses in order to collect money from an insurance company
Proximate Cause
A continuous chain of events that cause loss or damage that was reasonably foreseeable.
Material Fact
A fact that influences whether insurer accepts risk.
Concealment
A failure to disclose material facts.
Misrepresentation
A false statement about a material fact
Proof of Loss
A formal statement made by insured regarding loss. Contains times and cause of loss, insurable interests, liens, other insurance, and inventory of property
Warranty
A guarantee made by the insured. Breach may void policy
Physical Hazard
A hazard that exists due to the nature of the proximity itself, such as those inherent in the construction, occupancy, and exposure
Agent/Producer
A licensed individual that proposes, quotes, and sells insurance coverage. They are the insurance company representative who sells coverage
Arbitration
A method of settling disputes in a liability loss
Reciprocal Insurer
A non-incorporated association of individuals or businesses, called subscribers that are engaged in cooperative insurance programs. Each policy holder is insured by all other policyholders, and each insures the other. Coverage is exchanged on a reciprocal basis
Contributory Negligence
A person is partially responsible for their own injuries. They can't recover their damages if they contributed to the loss.
Law of Large Numbers
A principle stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.
Loss
A reduction in Value, Quality, or Quantity measurable in financial terms.
Blanket Coverage
A single amount of insurance for different property or different locations.
What is Insurance
A social financial device for the transfer of risk from an individual to a large group with similar risk
Scheduled limit
A specific amount of insurance on a list of building or property.
Accident
A sudden, accidental, unintended event causing loss or damage. An accident must be identifiable as to time and place
Other Policy Parts
Are not mandatory but included in policy: Definitions -- Explain important terms used throughout the policy Endorsements -- A form attached to add, delete, or change insurance policy
Comparative Negligence
Allows for recovery when both parties contributed to the loss. it is awarded based in the extent of each party's negligence.
Lloyd's of London
An Association that insures specialized risks
Occurrence
An accident, including continuous exposure to the same conditions, which results in injury or damage
Representations
An applicant's written or verbal statement that is true to the best of their knowledge. Statements on applications are generally considered representations
Mutual Companies
An incorporated insurer owned by the insureds that elect the company's management
Stock Companies
An incorporated insurer owned by the stockowners/shareowners that elect the management of the insurer
Aleatory Contract
Based on the exchange of unequal amounts or uncertain events.
Property Losses Include
Building or Structure, and Personal Property
Defamaiton
Circulation of false or malicious critical information to injure a person
Combined Single Limits (CSL)
Combines injury and property amounts per occurrence. Expressed as 100,000
General Damages
Compensate for items such as pain and suffering, and disfigurement.
Deductibles
Condition requiring the insured to retain a specific portion of the loss. Only apply to direct property losses. Apply per occurrence. Insurers use to require the insured to share in the loss. Deductibles can also serve to lower premiums
Replacement Cost Value (RCV)
Cost to repair or replace damaged property without deducting depreciation.
Vacancy
Coverage denied or reduced if building is vacant (no residents or contents) for 60 days. Not the same as property being unoccupied.
D.I.C.E.
D. Declarations I. Insuring Agreement C. Conditions E. Exclusions
Property Damage
Damage, destruction, or loss of tangible property
Pair and Set Clause
Determines Valuation method when one item of a pair or set is lost by either: Repair or replace lost part, or pay the difference in value before and after loss
Contract of Adhesion
Drafted solely by the Insurer (accept or reject) Ambiguity in policy language interpreted in insured's favor
Good Faith
Expected of both the customer and insured. If Customer doesn't, insurer may be released from contract. If insurer doesn't, law may enforce serious penalties.
Hazards
Factors or situations that increase frequency or severity of a loss
Negligence
Failure to act as a reasonable and prudent person would under similar circumstances
Personal Contract
Identities of involved parties is important to insurer
Appraisal
If insured and insurer don't agree on loss value: Either party may demand appraisal, Each party chooses an appraiser and is responsible for their fees, the appraisers select a third party if they cannot agree (fee is split) and Decision between an two of the three parties is binding
Binder
Immediate temporary coverage until policy is issued. May be verbal or written. Cannot exceed 90 days
Special Damages
Include all direct and specific expenses involved. Can I get a receipt.
Personal Injury
Injury of character or emotional well being resulting from: False arrest, detention, imprisonment or malicious prosecution. Libel, slander or Defamation of Character. Invasion of privacy, wrongful entry, or eviction.
Bodily Injury
Injury, sickness, or disease Includes required care, loss of services, loss of wages, and death.
Abandonment
Insured can't give property to insured and demand a total loss payment
Liberalization
Insurer can make changes applying to all existing policies without an endorsement on each. Only applies when coverage is broadened and no extra premium charged
Salvage
Insurer has right to any salvage after paying total loss. Insurer sells or disposes of property to reduce claim cost.
Duty to Defend
Insurer owes defense when a potential covered judgement exists. Some policies obligate insurer to pay all costs including: Premium for required bonds, Reasonable customer expenses, and Any interest on a judgment prior to issuing payment for judgment
Cancellation and Non-renewal
Insurers can only cancel or non-renew after 45 days of coverage or policy renewal for Non payment of premium Material misrepresentation or discovery of fraud Insurance Commissioner determines the policy continuation places the insurer in violation of state insurance laws. Increasing the chance of a loss by: Willful or reckless acts or omissions form the insured A change in the risk, violation of local fire, health, safety, building or construction regulations or ordinances Insured's criminal action such as illegal drug activity.
Punitive Damages
Intended to punish the wrongdoer making an example of them, to discourage others from behaving similarly. Not covered by insurance
Fraud
Intentional deception by misrepresenting material facts resulting in economic harm
Indirect Loss
It is not a direct result of a covered peril. it is as a consequence of or results indirectly from a direct loss.
What is casualty insurance?
It is used interchangeably with liability. Liability is a major component of casualty insurance and pays for third party's financial loss due to insured's negligence, but does not pay for insured's financial loss. It pays for tort liability, which is a civil wrong (not criminal). Includes a duty to defend above and beyond policy limits.
Contract Liability
Liability assumed under contact
Vicarious Liability
Liability imposed upon one party as a result of another's actions. Referred to as liability by association.
Absolute/Strict Liability
Liability without negligence because the activity is inherently dangerous
Insured's Duties in the Event of a Loss
Notify the insurer ASAP Protect property from further damage Notify the police if the loss involves a criminal act, such as theft. Provide a proof of loss within 60 days Separate the damaged property from the undamaged Prepare an inventory of the damaged property Allow the insurer to inspect property before repairing or replacing.
Renewal
Occurs when the insurer offers the insured another term of coverage.
Cancellation/Termination
Occurs when the insurer or insured terminate contract before its normal expiration. Insurer must give 10 days written notice for non-payment If Insurance company initiates, the premium refund is calculated on a pro-rata basis If the insured initiates, the insured may get a refund using a short rate calculation. This is a smaller refund as it includes a penalty percentage.
Non-Renewal
Occurs when the insurer will not continue the policy beyond the expiration date. The insurer must give 30 days written notice for all other reasons including non-renewal.
Conditions
Outlines what the insured must do. Describes some insurer responsibilities.
Assignment
Property and Casualty contracts are personal. Insured Can't assign or transfer to another without the insurer's written consent
Open Peril Coverage
Protects against all risks except those specifically excluded
Declarations
Provides identifying or descriptive information. Personalizes and individualizes the policy. Includes: Named insured and address, the property insured, policy premium, policy term or period, amount of insurance or limits of liability, and any applicable deductibles
Compensatory Damages
Reimburse the claimant only for losses that are sustained. The two types are special and general
Actual Cost Value (ACV)
Replacement cost minus depreciation
Coinsurance
Requires policyholders to carry adequate insurance in property or suffer penalty. Percentages can vary by contract, but 80% is typical
Named Peril Coverage
Specifically identified or named in policy
Split Limits
Splits the bodily injury and property damages amounts per occurrence. Expressed as 25/50/25
Insuring Agreement
States what the insurer promises to do One agreement for the whole policy Each coverage has its own separate agreement
Peril
The actual cause of loss
What Is A Limit Of Insurance
The maximum amount an insurer pays for a loss. Can be applied in three ways:
Aggregate limits
The maximum amount policy pays in any one policy period for all occurrences.
Speculative Risk
The possibility of either gain or loss. Traditional insurance policies cannot be used to these types of risk
Pure Risk
The possibility of loss, gain is not possible.
Indemnity
The process of restoring a customer to their condition prior to the loss. Restore only up to their amount of insurable interest. An insured is not meant to profit.
Subrogation
The pursuit if a responsible party for payment of damages. Insurer must pay on cases where the insured isn't at fault. Insurer has same rights as insured in pursuing payment.
Mortgage Clause
The rights of the mortgagee: Payments made to both insured and mortgagee (Insurable interest) Receives advanced notice of upcoming cancellation or nonrenewal. Can file a claim in the insured's behalf if the loss happens and insured doesn't file a claim. May still collect even if insured doesn't comply with terms and claim denied.
Specified Limit
The specific limit of insurance applied to a building or structure.
Risk
The uncertainty regarding financial loss.
Conditional Contract
There are conditions and rules where both parties must comply
Government Insurers
These insurers meet the insurance needs of individuals and businesses when the private insurance marketplace leaves insurance needs unmet. Examples: terrorism insurance, flood insurance, FDIC
Actuary
They are a mathematician that establishes and determines the rates to be charged for insurance coverage
Adjuster
They are a representative of the insurance company that determines the cause and the amount of the loss
Underwriter
They decides which applicants for insurance are accepted, and which are rejected in order to meet the company's desired financial goals. They evaluate risk
Insurable Interest
This exists when the applicant for insurance stands to suffer a loss or an injury as a result of an event which is to be ensured against
Exclusions
What policy won't do or situations with no coverage
What Makes a Contract Legally Enforceable
You Have Legal Parties You Have Competent Parties You Have Agreement- Both offer and Acceptance Consideration: Insured - Payment or promise to pay Premiums. Insurer - Promise to pay Covered Losses.
Pro Rata
if there is other insurance at time of loss, each policy pays their share of the loss Amount of insurance carried by A Divided by the total amount of insurance on property times the loss amount equals the amount paid by Company A
Property Valuation Methods
located in the policy conditions, the valuation method describes how the property value is determined at the time of loss. There are three common methods
Direct loss
the actual physical loss, destruction, or damage to the property insured.
Morale Hazard
the disposition of some people to be careless or irresponsible because they have insurance
Limit of liability
the maximum insurance pays a third party due to the insured's fault. Payments are made to a third party, not the insured Coverage includes a duty to defend above and beyond the policy limits
Agreed Value
the value of the property agreed upon by both the insurer and the insured at the time of application. Typically, for items that are difficult to replace like artwork, antiques, memorabilia, etc.
Legal Duty Owed
there's a legal duty to take reasonable care to protect rights and property to others